Universities of applied sciences (UASs) are recognized as a supplement to research universities in regional innovation systems. Although their significance has been proven in the process of knowledge innovation and transfer in many developed European countries, few studies have noticed their essential existence in less-developed regions. This is also the case in the context of China. This study focused on the organizational innovation used by Chinese UASs to tackle serious challenges in less-developed regions. Three case study universities were selected from Yunnan Province in western China. By analyzing their roles, compatibilities, and profitability, this study revealed that UASs are indispensable platforms for applied talent cultivation, local research, and social services in less-developed regions. Facing multiple incompatibility issues and unbalanced profitability, institutional entrepreneurs, including university leaders, middle-level managers, teachers, and students, jointly take innovative initiatives to participate in the regional innovation system. These initiatives not only stimulated the vitality of life for UASs in less-developed regions, but also shed light on the future development of UASs in different cultural contexts.